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Heather Hachigian+ and Priya Bala Miller*

+DPhil candidate, University of Oxford School of Geography and the Environment*PhD candidate, University of British Columbia and Scholar, Liu Institute for Global Issues

The Go Fossil Free campaign is spreading like wildfire across North American college and university campuses. With each trustee decision against adopting the campaign’s recommendations, students are growing more determined to see their university endowment and pension funds divest from the fossil fuel industry. For many, the campaign is reminiscent of the South African apartheid divestment campaign, initially orchestrated by university students and credited for playing a key role in bringing an end to the oppressive regime. But will the fossil free student campaigners enjoy similar success as their parents did with the apartheid divestment campaign? This will depend on whether the student campaigners recognize a currently overlooked but significant opportunity.

From a distance the fossil free campaign evokes a familiar scene – the idealistic, though admirable student campaigners, denouncing the stark contradiction between the values their universities are professing, and the actions taken by these universities in the context of their investment practices.

It is not hard to sympathize with the student campaigners’ cause either. Universities are increasingly branding themselves as being on the cutting-edge of sustainability and corporate social responsibility research and education, but at the same time falling short as responsible corporate citizens themselves. While some universities are beginning to walk the talk by integrating sustainability into a wider range of campus initiatives, CURI’s benchmarking report finds only a few are extending sustainability to investment activities.

A major roadblock to the Go Fossil Free campaign’s aspirations is the challenge that divestment poses to trustees’ legal responsibility to manage endowments for future generations. Campaigners have been quick to point out that university endowments only hold a small portion of their investments in fossil fuel companies targeted for divestment and therefore, divestment would not result in significant financial loss. And in the long-term, they insightfully suggest, fossil fuel companies will likely face downward pressure on the valuation as their current assets become stranded – that is, written off or transformed into liabilities. Universities are getting ahead of the curve by divesting now.

But even if divestment does not result in diversification loss, liquidating assets will incur transaction costs. Many university endowments are still reeling from the losses they sustained during the global financial crisis, forcing them to suspend payoutsto students. And isn’t this what we should expect from our universities – educating the best and brightest regardless of their financial background – leaving political decisions to our elected officials?

Nonetheless, the stakes are high. The most recent IPCC report finds that climate change is indeed the consequence of human activities, and fossil fuel burning a key contributor. Further, it suggests that it is possible to remain under the 2-degree threshold, but doing so requires immediate action.

Unfortunately the direct effects of university funds’ divestment from fossil fuel companies will largely be symbolic without large institutional investors on board. Neutral investors will be waiting at the other end to scoop up divested stock at a discount, profiting from other investors’ social conscience.

The real influence of the campaign lie in its stigmatization of the fossil fuel industry over an impressively short period of time.

This is the finding of the University of Oxford’s Smith School of Enterprise and the Environment report launched last week. The report makes a number of recommendations to the student campaigners to exploit the tremendous momentum and attention they have generated thus far. In particular, students should consider opportunities for encouraging university investment managers to engage with the industry on steps they can take to manage the transition to a low carbon economy. “Divestment is perhaps the final, and most drastic instrument in an investor’s corporate engagement toolkit. Considerable communication with management of the target firm can be undertaken to influence behaviour before using up the trump card of divestment.”

This analysis echoes CURI’s recommendations. However, in practice it has been difficult to rally students behind engagement. And here is where the significant missed opportunity lies. Harvard’s president recently defended the University’s rejection of the campaign’s recommendations on the grounds that the university prefers engagement to divestment. As more universities continue to defend their decision not to divest because they prefer to engage, student campaigners must be on their doorsteps, ensuring such commitments to engagement are actually being exercised. But doing so requires a deeper understanding of engagement, a process not widely understood among the public.

CURI strongly encourages campaigners to pause and reflect on the real influence they hold. Symbolic actions have their place, but campaigners will need to give serious consideration to their “theory of change”, and whether the emphasis on divestment will go far enough in bringing the urgent, and practical steps needed to promote a much needed shift to a greener economy.

Among the broader set of issues ignored by this campaign are the very real knock on impacts divestment could have on jobs and communities currently sustained by the fossil fuel industry. Green jobs must be a part of their future, though the interim will require a period of transition, where adequate resources are devoted to aspects like cleaner production and training. Setting portfolio targets for green-jobs sectors, with commensurate reductions in exposure to the fossil fuel industry could well be a middle-of-the road approach to tackle such related policy issues.

While the South African apartheid divestment campaign was a success by many accounts, it was also a long and hard fought battle extending over twenty years. Climate science tells us that we cannot wait that long for action. Student campaigners must recognize the greatest opportunities lie in their potential to change market norms through stigmatizing the industry, encouraging new legislation now, and drastically speeding up the rate at which the fossil fuel industry will be viewed as a bad bet by all investors.

CURI welcomes the opportunity to engage with campaigners on strategies for maximizing the impact of their campaign and realizing the real potential of their influence.